Business Deal Points by Bill Hubbard

Jumpstart Our Business Startups Act…

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Jumpstart Our Business Startups Act…

Better Opportunities, Similar (and somewhat less) Complexity

There is something new that really is exciting—for entrepreneurs and investors alike, as well as the America economy; it will have positive effects outside the U.S. as well.  This new legislation is a two-edged sword and has dangers both for entrepreneur and investor alike.  Sound advice is still needed for each, and yet it provides not just hope for entrepreneurial activity and jobs, but also the opportunity for action.

This new legislation is the Jumpstart Our Business Startups Act (and the Crowdfund Act as part of it)  On April 5, 2012 it was enacted into law, with the SEC having to issue  mandated rules  by July 4, 2012 (for general solicitation) and by early 2013 (for Crowdfunding).  By summer 2012, a democratization of capital (so to speak) will  have arrived in the U.S.—and it will have benefits abroad as well.

What is the Impact?

 

While it’s not going to be as painless for entrepreneurs as would have been hoped, it will now permit each person—regardless of paper diplomas and credentialing and career ticket-punching to have a real shot at being an entrepreneur.  This does not mean that anyone should go off half-cocked with each hair-brained business idea or hobby.

It does mean that with a well thought-out business plan for a new business or the purchase or expanding of an existing business (including overseas), that those with drive, determination, some capital, and entrepreneurial abilities might be able to raise up to $1,000,000  through their Facebook, Linked-In, or other internet networks (if permitted by each affected network) as well as their personal networks.

Securities Law compliance is still required BUT the elimination of advertising (for accredited investors though modified for Crowdfunding) and other restrictions is a huge leap forward.  For those contacted to invest in deals offered by those in your network, remember that no investment or loan should be made unless you believe, after investigation and with securing any needed advice, that it is the right investment for you and you and your family can afford a total loss of your investment if the business fails.

Some Words of Caution:

 

It will be ok to say no—even to family or the best of friends.  One further caution: avoid deals which rely at all on debt—unless  you are exceptionally finance savvy and knowledgeable about the market niche or have received advice from a qualified person  who has thoroughly vetted the investment and has solely your interest at heart.  Even then, be careful.

And for those entrepreneurs raising money, minimizing the use of debt and looking out for your investors and providing  each of them a  reasonable exit opportunity is going to be as essential as the seeming soundness of the business and the planning and execution of the growth plan.

Having  been involved with over 100  private placements of securities over the years (including on behalf of those in the industry and having represented clients where there were violations of the securities laws), the realities and possibilities involving raising money or investing are well understood. Raising Equity or Investing – Service Page of Bill Hubbard

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About the Author:

Bill Hubbard has over 30 years of experience helping businesses and their owners. He established Hubbard Business Counsel in 1997, after previously having been a partner in two of the largest Chicago law firms. He graduated from West Point (B.S., 1973), and the Illinois Institute of Technology/Chicago-Kent College of Law (J.D., with high honors,1978) and also obtained an Illinois Certified Public Accountant certificate. He served as an airborne and ranger trained infantry officer for the U.S. Army Judge Advocate Corps prosecutor and Officer-In-Charge in Berlin and as an Army prosecutor in Augsburg, Germany. He is admitted to practice law in the State of Illinois and is a member of the ABA Business Law Committees or Sub-committees (e.g. Mergers and Acquisitions, Securities, Private Equity, Business Law, Taxation, Limited Liability Companies, and Middle Market and Small Business Committees) and Chicago Bar Association Sub-committees (Mergers and Acquisition, Securities, Taxation),he American Institute of CPAs, the Illinois CPA Society, the Association for Corporate Growth, Alliance of M & A Advisors, and the Midwest Business Brokers and Intermediaries Association. He is a former Director and Past President of the West Point Society of Chicago. Bill lives in the Lincoln Park neighborhood of Chicago.